Despite an increase in leasing volume in Singapore, the CBRE reported a decline in the average condominium rental rates during the first quarter of 2015. Lease commencements have grown by 3.1 percent quarter-on-quarter posting 15,229. It marks a 13.5 percent increase as compared to the same period in the previous year.

The increase in leasing volume is attributed to the migration of tenants from HDB flats or older developments into newly opened condominiums offered at lower rents.

In addition, new permanent residents could have also added to this number as they leased homes while waiting to complete the compulsory three years prior to purchasing resale HDB flats.

The surge in rental volume did not propel the rents as it dropped across all regions. The average rental rate for the Core Central Region (CCR) has fell tremendously to 1.9 percent quarter-on-quarter, similarly the Outside Central Region (OCR) saw a decline of 1.8 percent. A 1.6 percent was posted by the Rest of Central Region (RCR), the smallest drop so far.

According to Joseph Tan, executive director of residential at CBRE, the steep decline in both CCR and OCR could be attributed to a number of factors including a higher supply of condominium units as well as a decrease in the liquidity of expats in the CCR. The surplus of newer units offered at lower rates definitely had an impact on the running rates.

A record number of new rental units, 2,976 new private homes, were built during Q1 2015 in OCR, which included 501 units at Hedges Park and 337 units at Woodhaven.

Joseph Tan noted that majority of these units were purchased not for occupation by owners but as investment. Given the sluggish market, owners are more inclined at securing tenants at lower rental rates rather than having no occupants.

The drastic drop in rental rates have propelled occupancy rate to 92.8 percent, while keeping number of vacant units to a low 7.2 percent.

CBRE further reported that luxury properties saw rents decline to $ 4.95 psf per month or down by two percent year-on-year. Similarly, prime properties dipped to $4.55 psf per month or four percent year-on-year. Rents for other properties likewise dropped to $3.15 psf per month or six percent year-on-year.

Given the current surplus of properties, real estate firms can expect a drop of five to 10 percent in the leasing volume this year, and a drop of five to seven percent on overall rents.

By the end of this year, the CBRE expects addition 22,000 new units are ready for occupancy – up by 10.4 percent from 19,921 the previous year.

The three-month Singapore interbank offered rate (SIBOR) has spiked to an unprecedented rate, well past 0.9 per cent this week – last happened in 2008.

SIBOR – the rate that is indicative of the cost of funds – has a huge impact on local real estate and loans market. Most housing loans are dependent on the three-month SIBOR.

What does it mean to home owners like you?

In plain language, a spike in the three-month SIBOR could mean homeowners paying more on their monthly housing loan payment. For instance, if your current housing loan is S$500,000 with 20 years remaining, the interest rate could increase to 2 per cent or $2,770.

With this development, a possible option that homeowners may consider is refinancing. Unfortunately, for homeowners tied down on a loan’s lock-in period, the increase in SIBOR means higher monthly payments.

SINGAPORE: Homeowners servicing mortgages will need to tighten their purse strings further: The three-month Singapore interbank offered rate (SIBOR) on Wednesday (Mar 11) charged past 0.9 per cent — a level not seen since 2008 — amid widespread expectations that the United States Federal Reserve will raise benchmark borrowing costs by mid-year.

The local interest rate, widely used to price home loans here, closed at 0.87943 per cent Wednesday, figures published on the Association of Banks in Singapore website showed. SIBOR continued to rise on Thursday to above 0.9 per cent, banking sources said, doubling the level seen at the beginning of this year.

Analysts whom TODAY spoke to said SIBOR’s climb followed the weakening of the Singapore dollar against the greenback in January, but took on added momentum after a very strong February job market in the US raised the likelihood that the Fed will normalise interest rates come June.

Following the US job report on Friday — showing the world’s biggest economy created 295,000 net new jobs last month to drive the unemployment rate to a seven-year low of 5.5 per cent — the US dollar rose to its highest versus the Singapore dollar since 2010.

“The rise in SIBOR has a lot to do with what we saw last Friday in the US, which caused the US dollar to move to a level we have not seen in a while. For a short time it touched S$1.39, which is very close to many people’s year-end forecast of S$1.40,” said UOB economist Francis Tan.

The other mortgage-pricing benchmark, the Singapore Swap Offer Rate (SOR), which is even more dependent on the US dollar-Singapore dollar exchange rate, soared above the 1 per cent level on Thursday, the highest since 2009.

The Monetary Authority of Singapore’s (MAS) surprise move in January to ease policy ahead of its scheduled April meeting had given rise to greater expectations of a weakening local currency, analysts said.

“I think there is rising expectations for the exchange rate to depreciate, not necessarily against the US dollar but also against the basket of currencies that the Singapore dollar is weighed against. That will put some upward pressure on interest rates,” said Credit Suisse economist Michael Wan.

“What this means is mortgage rates will rise, so households that have over-leveraged over the past years will be hit quite a bit and there may be some downward pressure on consumption spending. If domestic demand disappoints, it leaves more of the burden on external demand, or global growth, to drive the economy,” he added.

The recent rise in domestic interest rates have led to some economists re-looking their exchange rate projections for the year, but they said MAS’ policy decision come April will very much determine how things will pan out.

UOB’s Mr Tan said another easing by the central bank could push the US dollar to S$1.44, which will see the three-month SIBOR ending the year at around 1.3 per cent, up from his previous forecast of 1 per cent.

More homeowners who took housing loans from banks are now looking for refinancing options. Loan specialists said they have been getting more inquiries since the recent spike in SIBOR (Singapore Interbank Offered Rate).

Homeowners – whose mortgages are tied to SIBOR – are now facing higher monthly payments. One of those affected is 30-year-old engineer Lai Ming Kwan, who bought an executive condominium with his wife two years ago and he opted for a bank loan that is tied to SIBOR.

With the benchmark rising sharply in recent days, Mr Lai is concerned about how it will affect him. He said: “They predicted that it will stay at 0.3 per cent to 0.4 per cent for a few years. I did not expect it would go up to so high … SIBOR is increasing so fast that my pay cannot catch up with the financing rates.”

Both Mr Lai and his wife are working and have a 16-month-old child. “Expenses, lifestyles will have to change a bit because I have to save up more to contribute to the housing loan … so there’ll definitely be an impact, maybe less shopping. With the child coming up, there is also school fees, childcare fees, so the depletion will come from my savings. Having a second child will also mean more expenses,” he added.

Some homeowners, like Mr Lai, cannot look into other financing options yet because their loan deal has a lock-in period, which requires them to stick to the same bank for a couple of years. However, loan specialists said that those whose lock-in periods are up are already starting to look at refinancing options. This can include looking for a housing loan with fixed interest rates instead of being tied to one with variable rates.

One mortgage consultancy said that it has received many inquiries on refinancing in recent days, about 30 per cent more when compared to last year. Mr Sean Lim, the mortgage consultant head at iMoney, said: “They want to know what is happening in the market … So they are taking time to digest and understand what is happening in the market.

“The pace of increment did catch me by surprise. But it is also half-expected. The trend has been going up slowly over the last six months. Looking at the market trend, it will continue to go up.”

With interest rates rising, banks can be expected to review their mortgage rates and plans. Analysts said that potential home buyers or those who are hoping to refinance home loans should choose a package that best suits their financial needs.